Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
To minimize costs
B
To maximize revenue
C
To maximize profit
D
To increase market share
Understanding the Answer
Let's break down why this is correct
Answer
The primary goal of a firm in the context of profit maximization is to increase its earnings as much as possible. This means that the firm wants to generate more money from selling its products or services than it spends on costs like materials, labor, and overhead. For example, if a bakery sells cakes for $20 each and spends $10 on ingredients and labor for each cake, its profit is $10 per cake. By maximizing profit, the firm can invest in new projects, pay its employees better, or expand its operations, which can lead to more long-term success. Ultimately, profit maximization helps ensure the firm's survival and growth in a competitive market.
Detailed Explanation
The main aim of a business is to make as much money as possible. Other options are incorrect because Some might think that cutting costs is the main goal; Maximizing revenue sounds good, but it doesn't always lead to profit.
Key Concepts
firm behavior.
Topic
Profit Maximization for Firms
Difficulty
easy level question
Cognitive Level
understand
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